Mastermind Tobacco (K) Ltd, the beleaguered cigarette maker owned by the late tycoon Wilfred Murungi's estate, has issued termination notices to approximately 1,000 employees just four days after being placed under administration by I&M Bank due to undisclosed debts.

The troubled company ceased cigarette production six months ago in June, and its descent into administration on December 14 adds to the growing list of businesses seeking rescue through formal insolvency processes within a challenging operating environment.

Joint administrators Swaroop Rao Ponangipalli released a notice to all employees on December 18, 2023, stating, "We hereby notify all employees that on the placement of the company under administration, all existing contracts of employment stand automatically terminated, in accordance with the provisions of the law."

For those employees interested in continuing their employment with the company, the notice outlines a process.

"Any such re-employment will be communicated only after the initial assessment of whether the operations can continue at a financially viable level, which determines the number of employees required to be re-employed by the Joint Administrators," Ponangipalli explained.

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The termination notice did not specify the number of affected employees, but the company's website indicates a workforce of more than 1,000 individuals.

Mastermind Tobacco (K) Ltd has been entangled in legal disputes with its employees and the Kenya Revenue Authority (KRA).

In 2019, the company, along with the KRA, entered a deal to force the sale of prime assets to settle Sh2.9 billion in tax arrears.

Earlier this year, the firm faced a setback in court, losing a Sh517 million suit against the KRA.

The High Court denied Mastermind the opportunity to introduce new evidence supporting its case, which stemmed from a Tax Appeals Tribunal hearing.

The tribunal had been tasked with determining whether the contested cigarette consignments were exported and, therefore, zero-rated.

The tribunal ruled that Mastermind had not proven the consignments' import status, demanding further documentation.

Faced with this setback, Mastermind filed a suit against the Commissioner of Investigations and Enforcement, seeking court admission of inspection and verification reports to aid in the decision-making process.

The termination of contracts amid financial turmoil adds another layer to Mastermind Tobacco (K) Ltd's ongoing challenges, leaving its future operations and the fate of its employees uncertain.